MXIM 10-Q Quarterly Report Dec. 28, 2019

MAXIM INTEGRATED PRODUCTS INC

10-Ks and 10-Qs

10-K	Fiscal year ended June 26, 2021
10-Q	Quarter ended March 27, 2021
10-Q	Quarter ended Dec. 26, 2020
10-Q	Quarter ended Sept. 26, 2020
10-K	Fiscal year ended June 27, 2020
10-Q	Quarter ended March 28, 2020
10-Q	Quarter ended Dec. 28, 2019
10-Q	Quarter ended Sept. 28, 2019
10-K	Fiscal year ended June 29, 2019
10-Q	Quarter ended March 30, 2019
10-Q	Quarter ended Dec. 29, 2018
10-Q	Quarter ended Sept. 29, 2018
10-K	Fiscal year ended June 30, 2018
10-Q	Quarter ended March 31, 2018
10-Q	Quarter ended Dec. 30, 2017
10-Q	Quarter ended Sept. 23, 2017
10-K	Fiscal year ended June 24, 2017
10-Q	Quarter ended March 25, 2017
10-Q	Quarter ended Dec. 24, 2016
10-Q	Quarter ended Sept. 24, 2016
10-K	Fiscal year ended June 25, 2016
10-Q	Quarter ended March 26, 2016
10-Q	Quarter ended Dec. 26, 2015
10-Q	Quarter ended Sept. 26, 2015
10-K	Fiscal year ended June 27, 2015
10-Q	Quarter ended March 28, 2015
10-Q	Quarter ended Dec. 27, 2014
10-Q	Quarter ended Sept. 27, 2014
10-K	Fiscal year ended June 28, 2014
10-Q	Quarter ended March 29, 2014
10-Q	Quarter ended Dec. 28, 2013
10-Q	Quarter ended Sept. 28, 2013
10-K	Fiscal year ended June 29, 2013
10-Q	Quarter ended March 30, 2013
10-Q	Quarter ended Dec. 29, 2012
10-Q	Quarter ended Sept. 29, 2012
10-K	Fiscal year ended June 30, 2012
10-Q	Quarter ended March 31, 2012
10-Q	Quarter ended Dec. 31, 2011
10-Q	Quarter ended Sept. 24, 2011
10-K	Fiscal year ended June 25, 2011
10-Q	Quarter ended March 26, 2011
10-Q	Quarter ended Dec. 25, 2010
10-Q	Quarter ended Sept. 25, 2010
10-K	Fiscal year ended June 26, 2010
10-Q	Quarter ended March 27, 2010
10-Q	Quarter ended Dec. 26, 2009

PROXIES

DEF 14A	Filed on Sept. 28, 2020
DEF 14A	Filed on Sept. 27, 2019
DEF 14A	Filed on Sept. 28, 2018
DEF 14A	Filed on Sept. 29, 2017
DEF 14A	Filed on Sept. 30, 2016
DEF 14A	Filed on Sept. 30, 2015
DEF 14A	Filed on Oct. 1, 2014
DEF 14A	Filed on Oct. 1, 2013
DEF 14A	Filed on Oct. 1, 2012
DEF 14A	Filed on Sept. 30, 2011
DEF 14A	Filed on Sept. 29, 2010

Document

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM	10-Q



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended	December 28, 2019



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from ________ to ________.

Commission file number 1-34192

MAXIM INTEGRATED PRODUCTS, INC.

(Exact name of registrant as specified in its charter)



Delaware		94-2896096
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer I. D. No.)

160 Rio Robles

San Jose , California 95134

(Address of Principal Executive Offices including Zip Code)

( 408 ) 601-1000

(Registrant’s Telephone Number, Including Area Code)



Title of each class	Trading Symbol	Name of each exchange on which registered
Common stock, $0.001 par value	MXIM	The NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller” reporting company in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer	☒	Accelerated filer	☐	Non-accelerated filer	☐	Smaller reporting company	☐	Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revisited financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). (Check one): Yes ☐ No ☒

As of January 17, 2020 , there were 269,394,184 shares of Common Stock, par value $.001 per share, of the registrant outstanding.

MAXIM INTEGRATED PRODUCTS, INC.

INDEX



PART I - FINANCIAL INFORMATION		Page

Item 1. Financial Statements (Unaudited)		3

Condensed Consolidated Balance Sheets as of December 28, 2019 and June 29, 2019		3

Condensed Consolidated Statements of Income for the Three and Six Months Ended December 28, 2019 and December 29, 2018		4

Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended December 28, 2019 and December 29, 2018		5

Condensed Consolidated Statements of Shareholders' Equity for the Three and Six Months Ended December 28, 2019 and December 29, 2018		7

Condensed Consolidated Statements of Cash Flows for the Six Months Ended December 28, 2019 and December 29, 2018		6

Notes to Condensed Consolidated Financial Statements		9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		24

Item 3. Quantitative and Qualitative Disclosures About Market Risk		30

Item 4. Controls and Procedures		30

PART II - OTHER INFORMATION		31

Item 1. Legal Proceedings		31

Item 1A. Risk Factors		31

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		31

Item 3. Defaults Upon Senior Securities		31

Item 4. Mine Safety Disclosures		31

Item 5. Other Information		31

Item 6. Exhibits		32

SIGNATURE		33

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

MAXIM INTEGRATED PRODUCTS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)



	December 28, 2019			June 29, 2019
	(in thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	1,720,194		$	1,757,342
Short-term investments	63,006			140,990
Total cash, cash equivalents and short-term investments	1,783,200			1,898,332
Accounts receivable, net of allowances of $723 at December 28, 2019 and $148 at June 29, 2019	348,342			360,016
Inventories	223,958			246,512
Other current assets	23,797			34,640
Total current assets	2,379,297			2,539,500
Property, plant and equipment, net	571,359			577,722
Intangible assets, net	48,509			56,242
Goodwill	532,251			532,251
Other assets	95,413			38,267
TOTAL ASSETS	$	3,626,829		$	3,743,982

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	89,449		$	84,335
Price adjustment and other revenue reserves	105,237			100,490
Income taxes payable	38,307			33,765
Accrued salary and related expenses	94,739			118,704
Accrued expenses	32,739			33,873
Total current liabilities	360,471			371,167
Long-term debt	993,303			992,584
Income taxes payable	433,743			469,418
Other liabilities	112,803			65,537
Total liabilities	1,900,320			1,898,706

Commitments and contingencies (Note 11)

Stockholders’ equity:
Common stock and capital in excess of par value	270			272
Retained earnings	1,737,528			1,856,358
Accumulated other comprehensive loss	( 11,289		)	( 11,354		)
Total stockholders’ equity	1,726,509			1,845,276
TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY	$	3,626,829		$	3,743,982

See accompanying Notes to Condensed Consolidated Financial Statements.

MAXIM INTEGRATED PRODUCTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)



	Three Months Ended					Six Months Ended
	December 28, 2019			December 29, 2018		December 28, 2019		December 29, 2018
	(in thousands, except per share data)

Net revenues	$	551,070		$	576,906	$	1,084,110	$	1,215,401
Cost of goods sold	190,546			203,858		380,263		412,117
Gross margin	360,524			373,048		703,847		803,284
Operating expenses:
Research and development	111,914			110,303		220,903		223,011
Selling, general and administrative	76,071			77,853		152,186		159,372
Intangible asset amortization	756			756		1,512		1,529
Impairment of long-lived assets	—			753		—		753
Severance and restructuring expenses	2,728			1,179		4,162		2,173
Other operating expenses (income), net	( 1		)	—		24		60
Total operating expenses	191,468			190,844		378,787		386,898
Operating income	169,056			182,204		325,060		416,386
Interest and other income (expense), net	( 17		)	472		1,812		( 74		)
Income before provision for income taxes	169,039			182,676		326,872		416,312
Income tax provision	22,989			50,784		40,666		86,997
Net income	$	146,050		$	131,892	$	286,206	$	329,315

Earnings per share:
Basic	$	0.54		$	0.48	$	1.06	$	1.19
Diluted	$	0.53		$	0.47	$	1.04	$	1.17

Shares used in the calculation of earnings per share:
Basic	270,330			276,252		270,859		277,144
Diluted	273,269			280,008		273,884		281,414

See accompanying Notes to Condensed Consolidated Financial Statements.

MAXIM INTEGRATED PRODUCTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)



	Three Months Ended				Six Months Ended
	December 28, 2019		December 29, 2018		December 28, 2019			December 29, 2018
					(in thousands)
Net income	$	146,050	$	131,892	$	286,206		$	329,315
Other comprehensive income (loss), net of tax:
Change in net unrealized gains and losses on available-for-sale securities, net of tax benefit (expense) of $(3), $(201), $(17) and $(228), respectively	—		885		118			1,977
Change in net unrealized gains and losses on cash flow hedges, net of tax benefit (expense) of $(117), $(96), $48 and $(310), respectively	610		423		( 249		)	1,518
Change in net unrealized gains and losses on post-retirement benefits, net of tax benefit (expense) of $(20), $(18), $(42) and $(37), respectively	98		76		196			154
Other comprehensive income (loss), net	708		1,384		65			3,649
Total comprehensive income	$	146,758	$	133,276	$	286,271		$	332,964

See accompanying Notes to Condensed Consolidated Financial Statements.

MAXIM INTEGRATED PRODUCTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



	Six Months Ended
	December 28, 2019			December 29, 2018
	(in thousands)
Cash flows from operating activities:
Net income	$	286,206		$	329,315
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation	48,738			42,153
Depreciation and amortization	48,008			57,994
Deferred taxes	( 2,231		)	( 8,206		)
Loss (gain) on disposal of property, plant and equipment	489			2,896
Other adjustments	5,961			636
Changes in assets and liabilities:
Accounts receivable	16,421			19,798
Inventories	22,583			3,497
Other assets	( 55,820		)	( 6,587		)
Accounts payable	4,844			2,401
Income taxes payable	( 31,133		)	33,261
Accrued salary and related expenses	( 23,965		)	( 45,783		)
Other liabilities	58,634			60
Net cash provided by (used in) operating activities	378,735			431,435
Cash flows from investing activities:
Purchases of property, plant and equipment	( 34,301		)	( 30,913		)
Proceeds from sale of property, plant and equipment	171			2
Proceeds from sale of available-for-sale securities	—			27,253
Proceeds from maturity of available-for-sale securities	78,067			718,554
Payment in connection with business acquisition, net of cash acquired	—			( 2,949		)
Purchases of available-for-sale securities	—			( 214,587		)
Purchases of private company investments	—			( 906		)
Other investing activities	( 68		)	—
Net cash provided by (used in) investing activities	43,869			496,454
Cash flows from financing activities:
Repayment of debt	—			( 500,000		)
Contingent consideration paid	( 8,000		)	( 8,000		)
Net issuance of restricted stock units	( 17,566		)	( 13,444		)
Proceeds from stock options exercised	8,820			13,843
Issuance of common stock under employee stock purchase program	18,535			17,689
Repurchase of common stock	( 201,509		)	( 320,056		)
Dividends paid	( 260,032		)	( 254,665		)
Net cash provided by (used in) financing activities	( 459,752		)	( 1,064,633		)
Net increase (decrease) in cash and cash equivalents	( 37,148		)	( 136,744		)
Cash and cash equivalents:
Beginning of period	$	1,757,342		$	1,543,484
End of period	$	1,720,194		$	1,406,740
Supplemental disclosures of cash flow information:
Cash paid, net, during the period for income taxes	$	63,692		$	60,946
Cash paid for interest	$	17,063		$	23,313
Noncash financing and investing activities:
Accounts payable related to property, plant and equipment purchases	$	12,360		$	14,660

See accompanying Notes to Condensed Consolidated Financial Statements.

MAXIM INTEGRATED PRODUCTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)



	Three Months Ended December 28, 2019
	Common Stock					Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Total Stockholders' Equity
	Shares		Par Value			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Total Stockholders' Equity
	(in thousands)

Balance, September 28, 2019	270,883		$	271		$	—		$	1,793,012		$	( 11,997	)	$	1,781,286
Net income	—		—			—			146,050			—			146,050
Other comprehensive income (loss), net	—		—			—			—			708			708
Repurchase of common stock	( 1,862	)	( 1		)	( 36,321		)	( 71,635		)	—			( 107,957		)
Cumulative-effect adjustment for adoption of ASU 2016-02	—		—			—			( 89		)	—			( 89		)
Net issuance of restricted stock units	270		—			( 7,623		)	—			—			( 7,623		)
Stock options exercised	50		—			1,338			—			—			1,338
Stock-based compensation	—		—			24,071			—			—			24,071
Common stock issued under Employee Stock Purchase Plan	402		—			18,535			—			—			18,535
Dividends paid, $0.48 per common share	—		—			—			( 129,810		)	—			( 129,810		)
Balance, December 28, 2019	269,743		$	270		$	—		$	1,737,528		$	( 11,289	)	$	1,726,509



	Six Months Ended December 28, 2019
	Common Stock					Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Total Stockholders' Equity
	Shares		Par Value			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Total Stockholders' Equity
	(in thousands)

Balance, June 29, 2019	271,852		$	272		$	—		$	1,856,358		$	( 11,354	)	$	1,845,276
Net income	—		—			—			286,206			—			286,206
Other comprehensive income (loss), net	—		—			—			—			65			65
Repurchase of common stock	( 3,484	)	( 2		)	( 58,556		)	( 142,951		)	—			( 201,509		)
Cumulative-effect adjustment for adoption of ASU 2016-02	—		—			—			( 2,053		)	—			( 2,053		)
Net issuance of restricted stock units	657		—			( 17,566		)	—			—			( 17,566		)
Stock options exercised	316		—			8,820			—			—			8,820
Stock-based compensation	—		—			48,767			—			—			48,767
Common stock issued under Employee Stock Purchase Plan	402		—			18,535			—			—			18,535
Dividends paid, $0.96 per common share	—		—			—			( 260,032		)	—			( 260,032		)
Balance, December 28, 2019	269,743		$	270		$	—		$	1,737,528		$	( 11,289	)	$	1,726,509

See accompanying Notes to Condensed Consolidated Financial Statements.

MAXIM INTEGRATED PRODUCTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)



	Three Months Ended December 29, 2018
	Common Stock				Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Total Stockholders' Equity
	Shares		Par Value		Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Total Stockholders' Equity
	(in thousands)

Balance, September 29, 2018	277,430		$	279	$	—		$	1,924,764		$	( 12,720	)	$	1,912,323
Net income	—		—		—			131,892			—			131,892
Other comprehensive income (loss), net	—		—		—			—			1,384			1,384
Repurchase of common stock	( 3,960	)	—		( 44,181		)	( 163,377		)	—			( 207,558		)
Net issuance of restricted stock units	281		—		( 5,916		)	—			—			( 5,916		)
Stock options exercised	191		—		7,235			—			—			7,235
Stock-based compensation	—		—		21,702			—			—			21,702
Modification of liability to equity instruments ⁽¹⁾	—		—		3,471			—			—			3,471
Common stock issued under Employee Stock Purchase Plan	384		—		17,689			—			—			17,689
Dividends paid, $0.46 per common share	—		—		—			( 126,808		)	—			( 126,808		)
Balance, December 29, 2018	274,326		$	279	$	—		$	1,766,471		$	( 11,336	)	$	1,755,414



	Six Months Ended December 29, 2018
	Common Stock					Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Total Stockholders' Equity
	Shares			Par Value		Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Total Stockholders' Equity
	(in thousands)

Balance, June 30, 2018	278,664			$	279	$	—		$	1,945,646		$	( 14,985	)	$	1,930,940
Net income	—			—		—			329,315			—			329,315
Other comprehensive income (loss), net	—			—		—			—			3,649			3,649
Repurchase of common stock	( 5,822	)		—		( 63,744		)	( 256,312		)	—			( 320,056		)
Cumulative-effect adjustment for adoption of ASU 2016-01	—		—	—		—			2,487			—			2,487
Net issuance of restricted stock units	578			—		( 13,444		)	—			—			( 13,444		)
Stock options exercised	522			—		13,843			—			—			13,843
Stock-based compensation	—			—		42,185			—			—			42,185
Modification of liability to equity instruments ⁽¹⁾	—			—		3,471			—			—			3,471
Common stock issued under Employee Stock Purchase Plan	384			—		17,689			—			—			17,689
Dividends paid, $0.92 per common share	—			—		—			( 254,665		)	—			( 254,665		)
Balance, December 29, 2018	274,326			$	279	$	—		$	1,766,471		$	( 11,336	)	$	1,755,414

________________

(1) In December 2018, $3.5 million was reclassified from accrued salaries to additional paid-in capital due to a settlement agreement relating to the expiration of stock options.

See accompanying Notes to Condensed Consolidated Financial Statements.

MAXIM INTEGRATED PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1: BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of Maxim Integrated Products, Inc. and all of its majority-owned subsidiaries (collectively, the “Company” or “Maxim Integrated”) included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles of the United States of America (“GAAP”) have been condensed or omitted pursuant to applicable rules and regulations. In the opinion of management, all adjustments of a normal recurring nature which were considered necessary for fair statement have been included. The year-end condensed consolidated balance sheet data were derived from audited consolidated financial statements but do not include all disclosures required by GAAP. The results of operations for the six months ended December 28, 2019 are not necessarily indicative of the results to be expected for the entire year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended June 29, 2019 .

The Company has a 52-to-53-week fiscal year that ends on the last Saturday in June. Accordingly, every fifth or sixth fiscal year will be a 53-week fiscal year. Fiscal years 2019 and 2020 are 52-week fiscal years.

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Recently Issued Accounting Pronouncements

(i) New Accounting Updates Recently Adopted

In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2016-02 (ASU 2016-02), Leases (Topic 842) . Topic 842 states that lessees will recognize a lease liability for the commitment to make lease payments and a right-of-use asset for the underlying asset, for the duration of the lease. The FASB also issued ASU 2018-10 and ASU 2018-11 which provide improvements to ASU 2016-02 and an additional transition method option, respectively. This transition method allows a Company to apply the new lease accounting standard on adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings. The Company adopted ASU 2016-02 in the first quarter of fiscal year 2020.

The Company adopted the new standard using the modified retrospective method and electing the optional transition method practical expedient. Under the optional transition method, the Company recognized a cumulative-effect adjustment to the consolidated balance sheet and did not adjust comparative prior period information.

The Company elected multiple practical expedients permitted:


•	the hindsight practical expedient, in which the Company elected to use hindsight up until the effective date in determining the lease term and assessing impairment of right-of-use assets;


•	the practical expedient package that allows the Company to carry forward its determination of whether a lease exists, the classification of a lease, and whether initial direct lease costs exist for purposes of transition to the new standard; and


•	the practical expedient to combine lease and non-lease components.

The Company also elected an accounting policy in which it will not apply the recognition requirements to leases with an initial term of 12 months or less.

Effective June 30, 2019, the first day of adoption, the Company recognized $ 61.0 million of operating lease right-of-use assets and $ 65.2 million of operating lease liabilities on its Consolidated Balance Sheet. The difference of $ 4.2 million was primarily due to deferred rent, partially offset by prepaid rent for leases that existed as of the date of adoption, which decreased the opening balance of lease right-of-use (ROU) assets.

Updated Lease Accounting Policy

The Company determines if an arrangement is, or contains, a lease at inception. ROU assets are recorded as other assets, short-term lease obligations are recorded as accrued expenses and long-term lease obligations are recorded as other liabilities on the Company's Consolidated Balance Sheet. The Company’s classes of assets include real estate leases, equipment leases, and vehicle leases.

Lease ROU assets and lease liabilities are recognized based on the present value of future minimum lease payments over the lease term at commencement date. When discount rates implicit in leases cannot be readily determined, the Company uses its incremental borrowing rate based on information available at commencement date in determining the present value of future payments.

Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such option. Lease expense is recognized on a straight-line basis over the lease term. The Company elected to combine lease and non-lease components for all asset classes. In addition, the Company does not apply the recognition requirements to leases with lease terms of 12 months or less.

NOTE 3: BALANCE SHEET COMPONENTS

Inventories consist of:



	December 28, 2019		June 29, 2019
	(in thousands)
Raw materials	$	13,222	$	16,121
Work-in-process	142,551		160,273
Finished goods	68,185		70,118
Total inventories	$	223,958	$	246,512

Property, plant and equipment, net, consist of:



	December 28, 2019			June 29, 2019
	(in thousands)
Land	$	17,720		$	17,720
Buildings and building improvements	306,052			265,191
Machinery, equipment and software	1,338,349			1,367,606
Total	1,662,121			1,650,517
Less: accumulated depreciation	( 1,090,762		)	( 1,072,795		)
Total property, plant and equipment, net	$	571,359		$	577,722

Accrued salary and related expenses consist of:



	December 28, 2019		June 29, 2019
	(in thousands)
Accrued vacation	$	31,223	$	30,251
Accrued bonus	35,182		71,466
Accrued salaries	8,886		8,329
Accrued fringe benefits	6,397		4,807
Other	13,051		3,851
Total accrued salary and related expenses	$	94,739	$	118,704

NOTE 4: FAIR VALUE MEASUREMENTS

The FASB established a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. This hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Three levels of inputs that may be used to measure fair value are as follows:

Level 1 - Quoted (unadjusted) prices in active markets for identical assets or liabilities.

The Company’s Level 1 assets consist of money market funds.

Level 2 - Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.

The Company’s Level 2 assets and liabilities consist of U.S. Treasury securities, agency securities, corporate debt securities, certificates of deposit, commercial paper and foreign currency forward contracts that are valued using quoted market prices or are determined using a yield curve model based on current market rates.

Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

The Company's Level 3 assets and liabilities consist of acquisition-related contingent consideration liabilities.

Assets and liabilities measured at fair value on a recurring basis were as follows:



	December 28, 2019								June 29, 2019
	Fair Value Measurements Using						Total Balance		Fair Value Measurements Using						Total Balance
	Level 1		Level 2		Level 3		Total Balance		Level 1		Level 2		Level 3		Total Balance
	(in thousands)
Assets
Cash and cash equivalents
Money market funds	$	175,298	$	—	$	—	$	175,298	$	186,819	$	—	$	—	$	186,819
Short-term investments
Certificates of deposit	—		—		—		—		—		1,000		—		1,000
Corporate debt securities	—		63,006		—		63,006		—		139,990		—		139,990
Other current assets
Foreign currency forward contracts	—		361		—		361		—		651		—		651
Total assets	$	175,298	$	63,367	$	—	$	238,665	$	186,819	$	141,641	$	—	$	328,460

Liabilities
Accrued expenses
Foreign currency forward contracts	$	—	$	186	$	—	$	186	$	—	$	148	$	—	$	148
Contingent consideration	—		—		—		—		—		—		9,052		9,052
Total Liabilities	$	—	$	186	$	—	$	186	$	—	$	148	$	9,052	$	9,200

During the six months ended December 28, 2019 and the year ended June 29, 2019 , there were no transfers in or out of Level 3 from other levels in the fair value hierarchy.

There were no assets or liabilities measured at fair value on a non-recurring basis as of December 28, 2019 and June 29, 2019 other than impairments of long-lived assets.

As of December 28, 2019 and June 29, 2019 , the fair value of private company investments amounted to $ 20.9 million and $ 20.7 million , respectively. The aggregate amount of unrealized losses recognized from these investments were $ 3.0 million and $ 3.6 million , respectively, as of December 28, 2019 and June 29, 2019 .

The Company recorded $ 0.6 million and $( 0.8 ) million of unrealized gains (losses) on private company investments, during the three months ended December 28, 2019 and December 29, 2018 , respectively. The Company recorded $ 0.6 million and $( 0.7 ) million , of unrealized gains (losses) on private company investments during the six months ended December 28, 2019 and December 29, 2018 , respectively. Unrealized gains (losses) on private company investments are recorded in Interest and other income (expense), net in the Company's Condensed Consolidated Statements of Income.

NOTE 5: FINANCIAL INSTRUMENTS

Short-term investments

Fair values were as follows:



	December 28, 2019									June 29, 2019
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Estimated Fair Value		Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Estimated Fair Value
	(in thousands)
Available-for-sale investments
Certificates of deposit	$	—	$	—	$	—		$	—	$	1,000	$	—	$	—		$	1,000
Corporate debt securities	62,929		86		( 9		)	63,006		140,031		68		( 109		)	139,990
Total available-for-sale investments	$	62,929	$	86	$	( 9	)	$	63,006	$	141,031	$	68	$	( 109	)	$	140,990

In the three and six months ended December 28, 2019 and December 29, 2018 , the Company did not recognize any impairment charges on short-term investments. All available-for-sale investments have maturity dates between January 15, 2020 and March 12, 2021.

The Company invests in various financial instruments including U.S. Treasury securities, corporate debt securities, commercial paper, and certificates of deposit which include instruments issued or managed by industrial, financial, and utility institutions and U.S. Treasury securities which include U.S. government Treasury bills and Treasury notes.

Derivative instruments and hedging activities

The Company incurs expenditures denominated in non-U.S. currencies, primarily the Philippine Peso and the Thai Baht associated with the Company's manufacturing activities in the Philippines and Thailand, respectively, and the European Euro, Indian Rupee, Japanese Yen, Taiwan New Dollar, South Korean Won, Chinese Yuan and Canadian Dollar, for sales offices and research and development activities undertaken outside of the U.S.

The Company has established a program that primarily utilizes foreign currency forward contracts to offset the risks associated with the effects of certain foreign currency exposures. The Company does not use these foreign currency forward contracts for trading purposes.

Derivatives designated as cash flow hedging instruments

The Company designates certain forward contracts as hedging instruments pursuant to Accounting Standards Codification (“ASC”) 815, Derivatives and Hedging (“ASC 815”). As of December 28, 2019 and June 29, 2019 , the notional amounts of the forward contracts the Company held to purchase international currencies were $ 41.4 million and $ 48.5 million , respectively. As of December 28, 2019 and June 29, 2019 , the Company did not hold any forward contracts to sell international currencies.

Derivatives not designated as hedging instruments

As of December 28, 2019 and June 29, 2019 , the notional amounts of the forward contracts the Company held to purchase international currencies were $ 50.3 million and $ 19.6 million , respectively, and the notional amounts of forward contracts the

Company held to sell international currencies were $ 20.7 million and $ 21.1 million , respectively. The increase in forward contracts held to purchase international currencies from fiscal year 2019 to fiscal year 2020 was primarily due to the addition of operating lease liabilities, which were recorded on the Company’s Consolidated Balance Sheet upon adoption of the new lease accounting standard, Topic 842. The Company's foreign currency forward contract gains or losses included in the Condensed Consolidated Statements of Income were not material for the three and six months ended December 28, 2019 and December 29, 2018 , respectively.

Effect of hedge accounting on the Condensed Consolidated Statements of Income

The following tables summarize the gains (losses) from hedging activities recognized in the Company's Condensed Consolidated Statements of Income:



	Three Months Ended							Three Months Ended
	December 28, 2019							December 29, 2018
	Net Revenue		Cost of Goods Sold		Operating Expenses				Net Revenue		Cost of Goods Sold			Operating Expenses
	(in thousands)
Income and expenses line items in which the effects of cash flow hedges are recorded	$	551,070	$	190,546	$	191,468			$	576,906	$	203,858		$	190,844

Gain (loss) on cash flow hedges:
Foreign exchange contracts:
Gain (loss) reclassified from accumulated other comprehensive income into income	$	—	$	10	$	( 404	)		$	5	$	( 82	)	$	( 602	)



	Six Months Ended							Six Months Ended
	December 28, 2019							December 29, 2018
	Net Revenue		Cost of Goods Sold		Operating Expenses				Net Revenue		Cost of Goods Sold			Operating Expenses
	(in thousands)
Income and expenses line items in which the effects of cash flow hedges are recorded	$	1,084,110	$	380,263	$	378,787			$	1,215,401	$	412,117		$	386,898

Gain (loss) on cash flow hedges:
Foreign exchange contracts:
Gain (loss) reclassified from accumulated other comprehensive income into income	$	—	$	130	$	( 774	)		$	44	$	( 596	)	$	( 1,827	)

Outstanding debt obligations

The following table summarizes the Company’s outstanding debt obligations:



	December 28, 2019			June 29, 2019
	(in thousands)
3.45% fixed rate notes due June 2027	$	500,000		$	500,000
3.375% fixed rate notes due March 2023	500,000			500,000
Total outstanding debt	1,000,000			1,000,000
Less: Reduction for unamortized discount and debt issuance costs	( 6,697		)	( 7,416		)
Total long-term debt	$	993,303		$	992,584

On June 15, 2017, the Company completed a public offering of $ 500 million aggregate principal amount of the Company's 3.45 % senior unsecured and unsubordinated notes due in June 2027 (“2027 Notes”), with an effective interest rate of 3.5 % . Interest on the 2027 Notes is payable semi-annually in arrears on June 15 and December 15 of each year, commencing on December 15, 2017. The net proceeds of this offering were approximately $ 495.2 million , after issuing at a discount and deducting paid expenses.

On November 21, 2013, the Company completed a public offering of $ 500 million aggregate principal amount of the Company’s 2.5% coupon senior unsecured and unsubordinated notes due in November 2018 (“2018 Notes”), with an effective interest rate of 2.6%. Interest on the 2018 Notes is payable semi-annually in arrears on May 15 and November 15 of each year, commencing on May 15, 2014. The net proceeds of this offering were approximately $ 494.5 million , after issuing at a discount and deducting paid expenses. In November of 2018, the Company repaid the entire $ 500 million in principal and any outstanding interest, related to these outstanding notes.

On March 18, 2013, the Company completed a public offering of $ 500 million aggregate principal amount of the Company’s 3.375 % senior unsecured and unsubordinated notes due in March 2023 (“2023 Notes”), with an effective interest rate of 3.5 % . Interest on the 2023 Notes is payable semi-annually in arrears on March 15 and September 15 of each year. The net proceeds of this offering were approximately $ 490.0 million , after issuing at a discount and deducting paid expenses.

The debt indentures that govern the 2027 Notes and the 2023 Notes include covenants that limit the Company's ability to grant liens on its facilities and to enter into sale and leaseback transactions, which could limit the Company's ability to secure additional debt funding in the future. In circumstances involving a change of control of the Company followed by a downgrade of the rating of the 2027 Notes or the 2023 Notes, the Company would be required to make an offer to repurchase the affected notes at a purchase price equal to 101 % of the aggregate principal amount of such notes, plus accrued and unpaid interest.

The Company accounts for all the notes above based on their amortized cost. The discount and expenses are being amortized to Interest and other income (expense), net in the Condensed Consolidated Statements of Income over the life of the notes. The interest expense is recorded in Interest and other income (expense), net in the Condensed Consolidated Statements of Income. Amortized discount and expenses, as well as interest expense associated with the notes, were $ 8.9 million and $ 11.2 million during the three months ended December 28, 2019 and December 29, 2018 , respectively. Amortized discount and expenses, as well as interest expense associated with the notes, were $ 17.8 million and $ 23.6 million , respectively, during the six months ended December 28, 2019 and December 29, 2018 .

The estimated fair value of the Company’s outstanding debt obligations was approximately $ 1.03 billion as of December 28, 2019 . The estimated fair value of the debt is based primarily on observable market inputs and is a Level 2 measurement.

The Company recorded interest expense of $ 9.3 million and $ 11.7 million during the three months ended December 28, 2019 , and December 29, 2018 , respectively. The Company recorded interest expense of $ 18.6 million and $ 24.6 million during the six months ended December 28, 2019 , and December 29, 2018 , respectively.

Other Financial Instruments

For the balance of the Company’s financial instruments, cash equivalents, accounts receivable, accounts payable and other accrued liabilities, the carrying amounts approximate fair value due to their short maturities.

NOTE 6: STOCK-BASED COMPENSATION

At December 28, 2019 , the Company had one stock incentive plan, the Company's 1996 Stock Incentive Plan (the “1996 Plan”) and one employee stock purchase plan, the 2008 Employee Stock Purchase Plan (the “2008 ESPP”). The 1996 Plan was adopted by the Board of Directors to provide the grant of incentive stock options, non-statutory stock options, restricted stock units (“RSUs”), and market stock units (“MSUs”) to employees, directors, and consultants.

Pursuant to the 1996 Plan, the exercise price for incentive stock options and non-statutory stock options is determined to be the fair market value of the underlying shares on the date of grant. Options typically vest ratably over a four-year period measured from the date of grant. Options generally expire no later than seven years after the date of grant, subject to earlier termination upon an optionee's cessation of employment or service.

RSUs granted to employees typically vest ratably over a four-year period and are converted into shares of the Company's common stock upon vesting, subject to the employee's continued service to the Company over that period. RSUs granted after August 2017 will continue to vest post-employment at the Company for certain individuals satisfying specific eligibility requirements.

MSUs granted to employees typically vest over a four-year cliff period and are converted into shares of the Company's common stock upon vesting, subject to the employee's continued service to the Company over that period. The number of shares that are released at the end of the performance period can range from zero to a maximum cap depending on the Company's performance. MSUs granted after August 2017 will continue to vest post-employment at the Company for certain individuals satisfying specific eligibility requirements.

The following tables show total stock-based compensation expense by type of award, and the resulting tax effect, included in the Condensed Consolidated Statements of Income for the three and six months ended December 28, 2019 and December 29, 2018 , respectively:



	Three Months Ended								Three Months Ended
	December 28, 2019								December 29, 2018
	Stock Options		Restricted Stock Units		Employee Stock Purchase Plan		Total		Stock Options		Restricted Stock Units		Employee Stock Purchase Plan		Total
	(in thousands)
Cost of goods sold	$	5	$	2,269	$	699	$	2,973	$	9	$	1,884	$	495	$	2,388
Research and development	4		9,918		1,514		11,436		11		8,693		1,135		9,839
Selling, general and administrative	55		8,753		849		9,657		58		8,773		598		9,429
Pre-tax stock-based compensation expense	$	64	$	20,940	$	3,062	$	24,066	$	78	$	19,350	$	2,228	$	21,656
Less: income tax effect							2,193								2,304
Net stock-based compensation expense							$	21,873							$	19,352



	Six Months Ended								Six Months Ended
	December 28, 2019								December 29, 2018
	Stock Options		Restricted Stock Units		Employee Stock Purchase Plan		Total		Stock Options		Restricted Stock Units		Employee Stock Purchase Plan		Total
	(in thousands)
Cost of goods sold	$	14	$	4,549	$	1,368	$	5,931	$	19	$	3,646	$	1,002	$	4,667
Research and development	8		19,403		2,909		22,320		22		17,384		2,290		19,696
Selling, general and administrative	122		18,706		1,659		20,487		114		16,417		1,259		17,790
Pre-tax stock-based compensation expense	$	144	$	42,658	$	5,936	$	48,738	$	155	$	37,447	$	4,551	$	42,153
Less: income tax effect							5,081								4,268
Net stock-based compensation expense							$	43,657							$	37,885

The expense included in the Condensed Consolidated Statements of Income for RSUs include expenses related to MSUs of $ 2.4 million and $ 2.9 million for the three months ended December 28, 2019 and December 29, 2018 , respectively, and $ 6.8 million and $ 5.3 million for the six months ended December 28, 2019 and December 29, 2018 , respectively.

Stock Options

The fair value of options granted to employees under the 1996 Plan is estimated on the date of grant using the Black-Scholes option valuation model.

There were no stock options granted in the three and six months ended December 28, 2019 and December 29, 2018 .

The following table summarizes outstanding, exercisable and vested and expected to vest stock options as of December 28, 2019 and related activity for the six months ended December 28, 2019 :



	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value ⁽¹⁾
Balance at June 29, 2019	777,413		$	28.30
Options Granted	—		—
Options Exercised	( 302,708	)	27.82
Options Cancelled	( 16,575	)	27.30
Balance at December 28, 2019	458,130		$	28.49	1.0	$	15,139,460
Exercisable, December 28, 2019	458,130		$	28.49	1.0	$	15,139,460
Vested and expected to vest, December 28, 2019	458,130		$	28.49	1.0	$	15,139,460



(1)	Aggregate intrinsic value represents the difference between the exercise price and the closing price per share of the Company’s common stock on December 27, 2019, the last business day preceding the fiscal quarter-end, multiplied by the number of options outstanding, exercisable or vested and expected to vest as of December 28, 2019.

As of December 28, 2019 , there was no unrecognized stock compensation from unvested stock options.

Restricted Stock Units and Other Awards

The fair value of RSUs and other awards under the Company’s 1996 Plan is estimated using the value of the Company’s common stock on the date of grant, reduced by the present value of dividends expected to be paid on the Company’s common stock prior to vesting. The Company also estimates forfeitures at the time of grant and makes revisions to forfeitures on a quarterly basis.

The weighted-average fair value of RSUs and other awards granted was $ 56.21 and $ 50.90 per share for the three months ended December 28, 2019 and December 29, 2018 , respectively, and $ 48.30 and $ 54.71 per share for the six months ended December 28, 2019 and December 29, 2018 , respectively.

The following table summarizes the outstanding and expected to vest RSUs and other awards as of December 28, 2019 and related activity during the six months ended December 28, 2019 :



	Number of Shares		Weighted Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value ⁽¹⁾
Balance at June 29, 2019	4,918,306
Restricted stock units and other awards granted	1,550,765
Restricted stock units and other awards released	( 795,156	)
Restricted stock units and other awards cancelled	( 269,743	)
Balance at December 28, 2019	5,404,172		2.8	$	332,572,745
Outstanding and expected to vest, December 28, 2019	4,513,314		2.8	$	277,749,319



(1)	Aggregate intrinsic value for RSUs and other awards represents the closing price per share of the Company’s common stock on December 27, 2019, the last business day preceding the fiscal quarter-end, multiplied by the number of RSUs outstanding or expected to vest as of December 28, 2019.

The Company withheld shares totaling $ 7.6 million and $ 17.6 million in value as a result of employee withholding taxes based on the value of RSUs on their vesting date for the three and six months ended December 28, 2019 . Total payments for employees’ tax obligations to taxing authorities are reflected as financing activities within the Condensed Consolidated Statements of Cash Flows.

As of December 28, 2019 , there was $ 175.2 million of unrecognized compensation expense related to 5.4 million unvested RSUs and other awards, which is expected to be recognized over a weighted average period of approximately 2.8 years .

Market Stock Units (MSUs)

The Company grants MSUs to senior members of management in lieu of granting stock options. For MSUs granted prior to September 2017, the performance metrics of this program are based on relative performance of the Company’s stock price as compared to the Semiconductor Exchange Traded Fund index SPDR S&P (the “XSD”). For MSUs granted in September 2017 and after, the performance metrics for this program are based on the total shareholder return ("TSR") of the Company relative to the TSR of the other companies included in the XSD. The fair value of MSUs is estimated using a Monte Carlo simulation model on the date of grant. The Company also estimates forfeitures at the time of grant and makes revisions to forfeitures on a quarterly basis. Compensation expense is recognized based on the initial valuation and is not subsequently adjusted as a result of the Company’s performance relative to that of the XSD or the TSR of the companies included in the XSD, as applicable. Vesting for MSUs is contingent upon both service and market conditions and has a four-year vesting cliff period. MSUs granted after August 2017 vest based upon annual performance and are subject to continued service through the end of the four-year period but will continue to vest post-employment at the Company for certain individuals satisfying specific eligibility requirements.

The weighted-average fair value of MSUs granted was $ 54.70 and $ 75.48 per share for the six months ended December 28, 2019 and December 29, 2018 , respectively.

The following table summarizes the number of MSUs outstanding and expected to vest as of December 28, 2019 and their activity during the six months ended December 28, 2019 :



	Number of Shares		Weighted Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value ⁽¹⁾
Balance at June 29, 2019	1,048,532
Market stock units granted	259,984
Market stock units released	( 183,974	)
Market stock units cancelled	( 140,290	)
Balance at December 28, 2019	984,252		2.8	$	60,570,868
Outstanding and expected to vest, December 28, 2019	350,417		2.7	$	21,564,655



(1)	Aggregate intrinsic value for MSUs represents the closing price per share of the Company’s common stock on December 27, 2019, the last business day preceding the fiscal quarter-end, multiplied by the number of MSUs outstanding or expected to vest as of December 28, 2019.

As of December 28, 2019 , there was $ 32.4 million of unrecognized compensation expense related to 1.0 million unvested MSUs, which is expected to be recognized over a weighted average period of approximately 2.8 years .

Employee Stock Purchase Plan

Employees are granted rights to acquire common stock under the 2008 ESPP.

The fair value of 2008 ESPP rights granted to employees has been estimated at the date of grant using the Black-Scholes option valuation model using the following assumptions for the offering periods outstanding:



	Three Months Ended		Six Months Ended
	December 28, 2019	December 29, 2018	December 28, 2019	December 29, 2018
Expected holding period (in years)	0.5 years	0.5 years	0.5 years	0.5 years
Risk-free interest rate	1.6% - 2.7%	1.6% - 2.6%	1.6% - 2.7%	1.6% - 2.6%
Expected stock price volatility	28.4% - 31.3%	19.6% - 32.7%	28.4% - 31.3%	19.6% - 32.7%
Dividend yield	3.1% - 3.4%	2.1% - 3.1%	3.1% - 3.4%	2.1% - 3.1%

As of December 28, 2019 and December 29, 2018 , there was $ 10.1 million and $ 8.6 million , respectively, of unrecognized compensation expense related to the 2008 ESPP.

NOTE 7: EARNINGS PER SHARE

Basic earnings per share are computed using the weighted average number of shares of common stock outstanding during the period. For purposes of computing basic earnings per share, the weighted average number of outstanding shares of common stock excludes unvested RSUs and other awards as well as MSUs. Diluted earnings per share incorporates the incremental shares issuable upon the assumed exercise of stock options, assumed release of unvested RSUs and other awards as well as MSUs, and assumed issuance of common stock under the 2008 ESPP using the treasury stock method.

The following table sets forth the computation of basic and diluted earnings per share:



	Three Months Ended				Six Months Ended
	December 28, 2019		December 29, 2018		December 28, 2019		December 29, 2018
	(in thousands, except per share data)
Numerator for basic earnings per share and diluted earnings per share
Net income	$	146,050	$	131,892	$	286,206	$	329,315

Denominator for basic earnings per share	270,330		276,252		270,859		277,144
Effect of dilutive securities:
Stock options, ESPP, RSUs, and MSUs	2,939		3,756		3,025		4,270
Denominator for diluted earnings per share	273,269		280,008		273,884		281,414

Earnings per share
Basic	$	0.54	$	0.48	$	1.06	$	1.19
Diluted	$	0.53	$	0.47	$	1.04	$	1.17

For the three and six months ended December 28, 2019 and December 29, 2018 no stock awards were determined to be anti-dilutive. Securities which would have been anti-dilutive are insignificant and were excluded from the computation of diluted earnings per share in all periods.

NOTE 8: SEGMENT INFORMATION

The Company designs, develops, manufactures and markets a broad range of linear and mixed signal integrated circuits. All of the Company's products are designed through a centralized R&D function, manufactured using centralized manufacturing (internal and external), and sold through a centralized sales force and shared wholesale distributors.

The Company currently has one operating segment and reportable segment. In accordance with ASC No. 280, Segment Reporting (“ASC 280” ) , the Company considers operating segments to be components of the Company’s business for which separate financial information is available that is evaluated regularly by the Company’s Chief Operating Decision Maker in deciding how to allocate resources and in assessing performance. The Chief Operating Decision Maker for the Company was assessed and determined to be the CEO. The CEO reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance. Accordingly, the Company has determined that it has a single operating and reportable segment.

Enterprise-wide information is provided in accordance with ASC 280. Geographical revenue information is based on customers’ ship-to location. Long-lived assets consist of property, plant and equipment. Property, plant and equipment information is based on the physical location of the assets at the end of each fiscal year.

Net revenues from unaffiliated customers by geographic region were as follows:



	Three Months Ended				Six Months Ended
	December 28, 2019		December 29, 2018		December 28, 2019		December 29, 2018
	(in thousands)
United States	$	58,909	$	64,845	$	114,707	$	136,974
China	217,099		208,717		414,398		428,015
Rest of Asia	163,563		186,840		333,478		407,221
Europe	98,254		100,662		194,194		212,030
Rest of World	13,245		15,842		27,333		31,161
	$	551,070	$	576,906	$	1,084,110	$	1,215,401

Net long-lived assets by geographic region were as follows:



	December 28, 2019		June 29, 2019
	(in thousands)
United States	$	375,860	$	379,308
Philippines	97,784		102,634
Rest of World	97,715		95,780
	$	571,359	$	577,722

NOTE 9: COMPREHENSIVE INCOME (LOSS)

The changes in accumulated other comprehensive income (loss) by component and related tax effects in the six months ended December 28, 2019 and December 29, 2018 were as follows:



(in thousands)	Unrealized Gains and (Losses) on Intercompany Receivables			Unrealized Gains and (Losses) on Post-Retirement Benefits			Cumulative Translation Adjustment			Unrealized Gains and (Losses) on Cash Flow Hedges			Unrealized Gains and (Losses) on Available-For-Sale Securities			Total
June 29, 2019	$	( 6,280	)	$	( 4,322	)	$	( 1,136	)	$	425		$	( 41	)	$	( 11,354	)
Other comprehensive income (loss) before reclassifications	—			—			—			( 941		)	135			( 806		)
Amounts reclassified out of accumulated other comprehensive (income) loss	—			238			—			644			—			882
Tax effects	—			( 42		)	—			48			( 17		)	( 11		)
Other comprehensive income (loss), net	—			196			—			( 249		)	118			65
December 28, 2019	$	( 6,280	)	$	( 4,126	)	$	( 1,136	)	$	176		$	77		$	( 11,289	)



(in thousands)	Unrealized Gains and (Losses) on Intercompany Receivables			Unrealized Gains and (Losses) on Post-Retirement Benefits			Cumulative Translation Adjustment			Unrealized Gains and (Losses) on Cash Flow Hedges			Unrealized Gains and (Losses) on Available-For-Sale Securities			Total
June 30, 2018	$	( 6,280	)	$	( 2,516	)	$	( 1,136	)	$	( 1,383	)	$	( 3,670	)	$	( 14,985	)
Other comprehensive income (loss) before reclassifications	—			—			—			( 551		)	2,205			1,654
Amounts reclassified out of accumulated other comprehensive (income) loss	—			191			—			2,379			—			2,570
Tax effects	—			( 37		)	—			( 310		)	( 228		)	( 575		)
Other comprehensive income (loss), net	—			154			—			1,518			1,977			3,649
December 29, 2018	$	( 6,280	)	$	( 2,362	)	$	( 1,136	)	$	135		$	( 1,693	)	$	( 11,336	)

NOTE 10: INCOME TAXES

In the three and six months ended December 28, 2019 the Company recorded an income tax provision of $ 23.0 million and $ 40.7 million , respectively, compared to $ 50.8 million and $ 87.0 million for the three and six months ended December 29, 2018 , respectively. The Company’s effective tax rate for the three and six months ended December 28, 2019 was 13.6 % and 12.4 % , respectively, compared to 27.8 % and 20.9 % for the three and six months ended December 29, 2018 , respectively.

On December 22, 2017 legislation, commonly referred to as the Tax Cuts and Jobs Act (the “Act”), was enacted. The Act included a one-time tax on accumulated unremitted earnings of the Company's foreign subsidiaries (“Transition Tax”). SEC Staff Accounting Bulletin No. 118 allowed the use of provisional amounts (reasonable estimates) if accounting for the income tax effects of the Act was not completed. Provisional amounts must be adjusted within a one-year measurement period from the enactment date of the Act. In the second quarter of fiscal year 2018, the Company recorded a discrete $ 236.9 million provisional Transition Tax charge. During the measurement period, the Company gathered additional information and analyzed available guidance to more precisely compute the amount of the Transition Tax. In the second quarter of fiscal year 2019, the Company completed this work and recorded a discrete $ 22.1 million measurement period adjustment for the Transition Tax, which increased the Company’s effective tax rate for the three and six months ended December 29, 2018 by 12.1 % and 5.3 % , respectively. As of the end of the second quarter of fiscal year 2019, the accounting for income tax effects of the Act was completed.

The Company’s federal statutory tax rate is 21 % . The Company’s effective tax rate for the three and six months ended December 28, 2019 was lower than the statutory rate primarily due to earnings of foreign subsidiaries, generated by the Company's international operations managed in Ireland, that were taxed at lower rates, partially offset by U.S. tax expense related to Global Intangible Low-Taxed Income (“GILTI”).

The Company’s effective tax rate for the three months ended December 29, 2018 was higher than the statutory rate primarily due to a $ 22.1 million discrete charge for the Transition Tax, U.S. tax expense related to GILTI, and a $ 4.9 million discrete charge for interest accruals for unrecognized tax benefits, partially offset by earnings of foreign subsidiaries, generated by the Company's international operations managed in Ireland, that were taxed at lower rates.

The Company’s effective tax rate for the six months ended December 29, 2018 was lower than the statutory rate primarily due to earnings of foreign subsidiaries, generated by the Company's international operations managed in Ireland, that were taxed at lower rates, partially offset by a $ 22.1 million discrete charge for the Transition Tax, U.S. tax expense related to GILTI, and a $ 9.4 million discrete charge for interest accruals for unrecognized tax benefits.

The Company engages in continuous discussions and negotiations with tax authorities regarding tax matters in various jurisdictions. It is reasonably possible that the balance of gross unrecognized tax benefits, including accrued interest and penalties, could decrease up to $ 56.0 million within the next twelve months due to the completion of federal tax audits, including any administrative appeals. The $ 56.0 million primarily relates to matters involving federal taxation of cross-border transactions.

The Company’s federal corporate income tax returns are audited on a recurring basis by the Internal Revenue Service (“IRS”). In fiscal year 2017, the IRS commenced an audit of the Company’s federal corporate income tax returns for fiscal years 2012 through 2014, which is ongoing. In fiscal year 2020 the IRS commenced an audit of the Company's federal corporate income tax returns for fiscal years 2015 through 2017, which is ongoing.

NOTE 11: COMMITMENTS AND CONTINGENCIES

Legal Proceedings

The Company is party or subject to various legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of business, including proceedings and claims that relate to intellectual property matters. While the outcome of these matters cannot be predicted with certainty, the Company does not believe that the outcome of any of these matters, individually or in the aggregate, will result in losses that are materially in excess of amounts already recognized or reserved, if any.

Indemnification

The Company indemnifies certain customers, distributors, suppliers and subcontractors for attorney fees, damages and costs awarded against such parties in certain circumstances in which the Company's products are alleged to infringe third party intellectual property rights, including patents, registered trademarks or copyrights. The terms of the Company's indemnification obligations are generally perpetual from the effective date of the agreement. In certain cases, there are limits on and exceptions to the Company's potential liability for indemnification relating to intellectual property infringement claims.

Pursuant to the Company's charter documents and separate written indemnification agreements, the Company has certain indemnification obligations to its current officers, employees and directors, as well as certain former officers and directors.

NOTE 12: COMMON STOCK REPURCHASES

On October 30, 2018, the Board of Directors of the Company authorized the repurchase of up to $ 1.5 billion of the Company’s common stock. The stock repurchase authorization does not have an expiration date and the pace of repurchase activity will depend on factors such as current stock price, levels of cash generated from operations, cash requirements, and other factors. All prior repurchase authorizations by the Company’s Board of Directors for the repurchase of common stock were cancelled and superseded by this repurchase authorization.

During the six months ended December 28, 2019 , the Company repurchased approximately 3.5 million shares of its common stock for $ 201.5 million . As of December 28, 2019 , the Company had remaining authorization of $ 0.9 billion for future share repurchases. The number of shares to be repurchased and the timing of such repurchases will be based on several factors, including the price of the Company’s common stock and general market and business conditions.

NOTE 13: LEASES

The Company's lease obligations consist of operating leases for domestic and international office facilities, data centers, and equipment. These leases expire at various dates through fiscal year 2031. For the three and six months ended December 28, 2019 , the Company recorded operating lease expense of $ 2.9 million and $ 5.9 million , respectively.

Leases are included in the following Condensed Consolidated Balance Sheet lines:



	December 28, 2019
	(in thousands)
Other assets	$	56,170

Accrued expenses	$	10,028
Other liabilities	$	50,784

Future minimum lease payments under non-cancelable operating leases as of December 28, 2019 are as follows:



	Operating Lease Obligations
Fiscal Year	(in thousands)
Remainder of 2020	$	5,969
2021	11,818
2022	10,847
2023	9,599
2024	8,202
Thereafter	21,904
Total	68,339
Less imputed interest	7,657
Total	$	60,682

Other information related to leases as of December 28, 2019 are as follows:



	Six Months Ended
	December 28, 2019
Supplemental cash flow information	(in thousands)
Operating cash flows used for operating leases	$	5,911
Weighted-average remaining lease term - operating leases, in years	7
Weighted-average discount rate - operating leases	3.45		%

Since most of our operating leases do not provide an implicit interest rate, the Company used a portfolio approach to determine a collateralized incremental borrowing rate based on the information available at the commencement date to determine the lease liability.

NOTE 14: GOODWILL AND INTANGIBLE ASSETS

Goodwill

The Company monitors the recoverability of goodwill recorded in connection with acquisitions, by reporting unit, annually, or more often if events or changes in circumstances indicate that the carrying amount may not be recoverable.

There were no changes to goodwill during the six months ended December 28, 2019 .

No indicators or instances of impairment were identified during the six months and fiscal year ended December 28, 2019 and June 29, 2019 , respectively.

Intangible Assets

Intangible assets consisted of the following:



	December 28, 2019						June 29, 2019
	Original Cost		Accumulated Amortization		Net		Original Cost		Accumulated Amortization		Net
	(in thousands)
Intellectual property	$	490,136	$	451,780	$	38,356	$	487,346	$	445,558	$	41,788
Customer relationships	116,505		107,244		9,261		116,505		105,901		10,604
Trade name	9,974		9,082		892		9,974		8,914		1,060
Patents	2,500		2,500		—		2,500		2,500		—
Total amortizable purchased intangible assets	619,115		570,606		48,509		616,325		562,873		53,452
In-process research & development (IPR&D)	—		—		—		2,790		—		2,790
Total purchased intangible assets	$	619,115	$	570,606	$	48,509	$	619,115	$	562,873	$	56,242

The following table presents the amortization expense of intangible assets and its presentation in the Condensed Consolidated Statements of Income:



	Three Months Ended				Six Months Ended
	December 28, 2019		December 29, 2018		December 28, 2019		December 29, 2018
	(in thousands)
Cost of goods sold	$	3,111	$	6,868	$	6,221	$	13,783
Intangible asset amortization	756		756		1,512		1,529
Total intangible asset amortization expenses	$	3,867	$	7,624	$	7,733	$	15,312

The following table represents the estimated future amortization expense of intangible assets as of December 28, 2019 :



	Amount
Fiscal Year	(in thousands)
Remainder of 2020	$	7,733
2021	13,767
2022	8,088
2023	7,604
2024	4,628
Thereafter	6,689
Total intangible assets	$	48,509

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Maxim Integrated Products, Inc. (“Maxim Integrated” or the “Company” and also referred to as “we,” “our” or “us”) disclaims any duty to and undertakes no obligation to update any forward-looking statement, whether as a result of new information relating to existing conditions, future events or otherwise or to release publicly the results of any future revisions it may make to forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, except as required by federal securities laws. Readers are cautioned not to place undue reliance on such statements, which speak only as of the date of this Quarterly Report on Form 10-Q. Readers should carefully review future reports and documents that the Company files with or furnishes to the SEC from time to time, such as its Annual Reports on Form 10-K, its Quarterly Reports on Form 10-Q, and any Current Reports on Form 8-K.

Overview of Business

Maxim Integrated Products, Inc. (“Maxim Integrated” or the “Company” and also referred to as “we,” “our” or “us”) designs, develops, manufactures and markets a broad range of linear and mixed-signal integrated circuits, commonly referred to as analog circuits, for a large number of customers in diverse geographical locations. The analog market is fragmented and characterized by many diverse applications, a great number of product variations and, with respect to many circuit types, relatively long product life cycles. We are a global company with a wafer manufacturing facility in the U.S., test facilities in the Philippines and Thailand, and sales and circuit design offices around the world. We also utilize third parties for manufacturing and assembly of our products.

The Linear and Mixed-Signal Analog Integrated Circuit Market

All electronic signals generally fall into one of two categories, linear or digital. Linear (or analog) signals represent real world phenomena, such as temperature, pressure, sound or speed, and are continuously variable over a wide range of values. Digital signals represent the “ones” and “zeros” of binary arithmetic and are either on or off.

Three general classes of semiconductor products arise from this distinction between linear and digital signals:


•	digital devices, such as memories and microprocessors that operate primarily in the digital domain;


•	linear devices, such as amplifiers, references, analog multiplexers and switches that operate primarily in the analog domain; and


•	mixed-signal devices such as data converter devices that combine linear and digital functions on the same integrated circuit and interface between the analog and digital domains.

Our strategy has been to target both the linear and mixed-signal markets, often collectively referred to as the analog market. However, some of our products are exclusively or principally digital. While our focus continues to be on the linear and mixed-signal market, our capabilities in the digital domain enable development of new mixed-signal and other products with highly sophisticated digital characteristics.

At the beginning of fiscal year 2020, we combined our Computing Major End-Market category with our Communications and Data Center Major End-Market category. Our former Computing Major End-Market category focused on Desktop Computers, Notebook Computers, and Peripherals and Other Computer markets.

Our linear and mixed-signal products now serve four major end-markets: (i) Automotive, (ii) Communications and Data Center, (iii) Consumer and (iv) Industrial. These major end-markets and their corresponding markets are noted in the table below:



MAJOR END-MARKET		MARKET

AUTOMOTIVE		Infotainment
		Powertrain
		Body Electronics
		Safety and Security

COMMUNICATIONS & DATA CENTER		Base Stations
		Data Center
		Data Storage
		Desktop Computers
		Network & Datacom
		Notebook Computers
		Peripherals & Other Computer
		Server
		Telecom
		Other Communications

CONSUMER		Smartphones
		Digital Cameras
		Handheld Computers
		Home Entertainment & Appliances
		Wearables
		Other Consumer

INDUSTRIAL		Automatic Test Equipment
		Control & Automation
		Electrical Instrumentation
		Financial Terminals
		Medical
		Security
		USB Extension
		Other Industrial

CRITICAL ACCOUNTING POLICIES

The methods, estimates, and judgments we use in applying our most critical accounting policies have a significant impact on the results we report in our financial statements. The Securities and Exchange Commission (“SEC”) has defined the most critical accounting policies as the ones that are most important to the presentation of our financial condition and results of operations, and that require us to make our most difficult and subjective accounting judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, our most critical accounting policies include revenue recognition, which impacts the recording of net revenues; valuation of inventories, which impacts costs of goods sold and gross margins; the assessment of recoverability of long-lived assets, which impacts impairment of long-lived assets; assessment of recoverability of intangible assets and goodwill, which impacts impairment of goodwill and intangible assets; accounting for income taxes, which impacts the income tax provision; and assessment of litigation and contingencies, which impacts charges recorded in cost of goods

sold, selling, general and administrative expenses and income taxes. These policies and the estimates and judgments involved are discussed further in the Management’s Discussion and Analysis of Financial Condition in our Annual Report on Form 10-K for the fiscal year ended June 29, 2019 . We have other significant accounting policies that either do not generally require estimates and judgments that are as difficult or subjective, or it is less likely that such accounting policies would have a material impact on our reported results of operations for a given period.

Except for the accounting policies and estimates outlined under Part I, Item 1. Financial Statements - Note 2, there have been no material changes during the six months ended December 28, 2019 to the items that we disclosed as our critical accounting policies and estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended June 29, 2019 .

RESULTS OF OPERATIONS

The following table sets forth certain Condensed Consolidated Statements of Income data expressed as a percentage of net revenues for the periods indicated:



	Three Months Ended				Six Months Ended
	December 28, 2019		December 29, 2018		December 28, 2019		December 29, 2018

Net revenues	100.0	%	100.0	%	100.0	%	100.0	%
Cost of goods sold	34.6	%	35.3	%	35.1	%	33.9	%
Gross margin	65.4	%	64.7	%	64.9	%	66.1	%
Operating expenses:
Research and development	20.3	%	19.1	%	20.4	%	18.3	%
Selling, general and administrative	13.8	%	13.5	%	14.0	%	13.1	%
Intangible asset amortization	0.1	%	0.1	%	0.1	%	0.1	%
Impairment of long-lived assets	—	%	0.1	%	—	%	0.1	%
Severance and restructuring expenses	0.5	%	0.2	%	0.4	%	0.2	%
Other operating expenses (income), net	—	%	—	%	—	%	—	%
Total operating expenses	34.7	%	33.1	%	34.9	%	31.8	%
Operating income	30.7	%	31.6	%	30.0	%	34.3	%
Interest and other income (expense), net	—	%	0.1	%	0.2	%	—	%
Income before provision for income taxes	30.7	%	31.7	%	30.2	%	34.3	%
Income tax provision (benefit)	4.2	%	8.8	%	3.8	%	7.2	%
Net income	26.5	%	22.9	%	26.4	%	27.1	%

The following table shows stock-based compensation included in the components of the Condensed Consolidated Statements of Income reported above as a percentage of net revenues for the periods indicated:



	Three Months Ended				Six Months Ended
	December 28, 2019		December 29, 2018		December 28, 2019		December 29, 2018
Cost of goods sold	0.5	%	0.4	%	0.5	%	0.4	%
Research and development	2.1	%	1.7	%	2.1	%	1.6	%
Selling, general and administrative	1.8	%	1.6	%	1.9	%	1.5	%
	4.4	%	3.7	%	4.5	%	3.5	%

Net Revenues

Net revenues were $551.1 million and $576.9 million for the three months ended December 28, 2019 and December 29, 2018 , respectively. Revenue from consumer products was down by 22% primarily due to lower demand in smartphone products. Revenue from communications and data center products was up by 12% driven by an increased demand for base station, data center, and data storage products. These results include net revenues for the three months ended December 29, 2018 that align with our revised end-market categories.

Net revenues were $1.1 billion and $1.2 billion for the six months ended December 28, 2019 and December 29, 2018 , respectively. Revenue from consumer products was down by 21% primarily due to lower demand in smartphone products. Revenue from industrial products was down by 11% primarily due to lower demand in control and automation products. These results include net revenues for the six months ended December 29, 2018 that align with our revised end-market categories.

During each of the three months ended December 28, 2019 and December 29, 2018 , approximately 89% of net revenues, were derived from customers outside of the United States. While less than 1.0% of our sales are denominated in currencies other than U.S. dollars, we enter into foreign currency forward contracts to mitigate our risks on firm commitments and net monetary assets

denominated in foreign currencies. The impact of changes in foreign exchange rates on our revenue and results of operations for the three and six months ended December 28, 2019 and December 29, 2018 was immaterial.

Gross Margin

Our gross margin percentages were 65.4% and 64.7% for the three months ended December 28, 2019 and December 29, 2018 , respectively. Our gross margin increased by 0.7 percentage points, primarily due to lower inventory reserve requirements.

Our gross margin percentages were 64.9% and 66.1% for the six months ended December 28, 2019 and December 29, 2018 , respectively. Our gross margin decreased by 1.2 percentage points, primarily due to lower revenues.

Research and Development

Research and development expenses were $111.9 million and $110.3 million for the three months ended December 28, 2019 and December 29, 2018 , respectively, which represented 20.3% and 19.1% of net revenues for each respective period. The $1.6 million increase was due to higher salaries and related personnel costs.

Research and development expenses were $220.9 million and $223.0 million for the six months ended December 28, 2019 and December 29, 2018 , respectively, which represented 20.4% and 18.3% of net revenues for each respective period. The $2.1 million decrease was due to lower salaries and travel expenses.

Selling, General and Administrative

Selling, general and administrative expenses were $76.1 million and $77.9 million for the three months ended December 28, 2019 and December 29, 2018 , respectively, which represented 13.8% and 13.5% of net revenues for each respective period. The $1.8 million decrease was due to lower travel and marketing expenses.

Selling, general and administrative expenses were $152.2 million and $159.4 million for the six months ended December 28, 2019 and December 29, 2018 , respectively, which represented 14.0% and 13.1% of net revenues for each respective period. The $7.2 million decrease was due to lower salaries and related personnel costs, and lower depreciation and travel expenses.

Provision for Income Taxes

In the three and six months ended December 28, 2019, the Company recorded an income tax provision of $23.0 million and $40.7 million, respectively, compared to $50.8 million and $87.0 million for the three and six months ended December 29, 2018, respectively. The Company’s effective tax rate for the three and six months ended December 28, 2019 was 13.6% and 12.4%, respectively, compared to 27.8% and 20.9% for the three and six months ended December 29, 2018, respectively.

On December 22, 2017, legislation, commonly referred to as the Tax Cuts and Jobs Act (the “Act”), was enacted. The Act included a one-time tax on accumulated unremitted earnings of the Company's foreign subsidiaries (“Transition Tax”). SEC Staff Accounting Bulletin No. 118 allowed the use of provisional amounts (reasonable estimates) if accounting for the income tax effects of the Act was not completed. Provisional amounts must be adjusted within a one-year measurement period from the enactment date of the Act. In the second quarter of fiscal year 2018, the Company recorded a discrete $236.9 million provisional Transition Tax charge. During the measurement period, the Company gathered additional information and analyzed available guidance to more precisely compute the amount of the Transition Tax. In the second quarter of fiscal year 2019 the Company completed this work and recorded a discrete $22.1 million measurement period adjustment for the Transition Tax, which increased the Company’s effective tax rate for the three and six months ended December 29, 2018 by 12.1% and 5.3%, respectively. As of the end of the second quarter of fiscal year 2019, the accounting for income tax effects of the Act was completed.

The Company’s federal statutory tax rate is 21%. The Company’s effective tax rate for the three and six months ended December 28, 2019 was lower than the statutory rate primarily due to earnings of foreign subsidiaries, generated by the Company's international operations managed in Ireland, that were taxed at lower rates, partially offset by U.S. tax expense related to Global Intangible Low-Taxed Income (“GILTI”).

The Company’s effective tax rate for the three months ended December 29, 2018 was higher than the statutory rate primarily due to a $22.1 million discrete charge for the Transition Tax, U.S. tax expense related to GILTI, and a $4.9 million discrete charge for interest accruals for unrecognized tax benefits, partially offset by earnings of foreign subsidiaries, generated by the Company's international operations managed in Ireland, that were taxed at lower rates.

The Company’s effective tax rate for the six months ended December 29, 2018 was lower than the statutory rate primarily due to earnings of foreign subsidiaries, generated by the Company's international operations managed in Ireland, that were taxed at lower rates, partially offset by a $22.1 million discrete charge for the Transition Tax, U.S. tax expense related to GILTI, and a $9.4 million discrete charge for interest accruals for unrecognized tax benefits.

BACKLOG

As of December 28, 2019 and June 29, 2019 , our current quarter backlog was approximately $455.6 million and $391.3 million respectively. In backlog, we include orders with customer request dates within the next three months. As is customary in the semiconductor industry, these orders may be canceled in most cases without penalty to customers. Accordingly, we believe that our backlog is not a reliable measure of future revenues. All backlog numbers have been adjusted for estimated future distribution ship and debit pricing adjustments.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

Financial Condition

Cash flows were as follows:



	Six Months Ended
	December 28, 2019			December 29, 2018
	(in thousands)
Net cash provided by (used in) operating activities	$	378,735		$	431,435
Net cash provided by (used in) investing activities	43,869			496,454
Net cash provided by (used in) financing activities	(459,752		)	(1,064,633		)
Net increase (decrease) in cash and cash equivalents	$	(37,148	)	$	(136,744	)

Operating activities

Cash provided by operating activities is net income adjusted for certain non-cash items and changes in certain assets and liabilities.

Cash provided by operating activities decreased by $52.7 million for the six months ended December 28, 2019 compared with the six months ended December 29, 2018 due mainly to lower net income and changes in working capital. Changes in working capital were driven by changes in income tax payable, partially offset by changes in accrued expenses and inventories.

Investing activities

Investing cash flows consist primarily of net investment purchases and maturities, and capital expenditures.

Cash provided by investing activities decreased by $452.6 million for the six months ended December 28, 2019 compared with the six months ended December 29, 2018 . The decrease was due to lower proceeds from maturity of available-for-sale securities offset by lower purchases of available-for-sale securities.

Financing activities

Financing cash flows consist primarily of debt issuance, repurchases of common stock, and payment of dividends to stockholders.

Cash used in financing activities decreased by $604.9 million for the six months ended December 28, 2019 compared with the six months ended December 29, 2018 . The decrease was due to a $500.0 million debt repayment we made in November 2018 and lower repurchases of common stock.

Liquidity and Capital Resources

Our primary source of liquidity is our cash flows from operating activities resulting from net income and management of working capital.

As of December 28, 2019 , our available funds consisted of $1.8 billion in cash, cash equivalents and short-term investments.

On October 30, 2018, we were authorized to repurchase up to $1.5 billion of the Company's common stock. During the three and six months ended December 28, 2019 , we repurchased an aggregate of $108.0 million and $201.5 million of the Company's common stock, respectively.

During the three and six months ended December 28, 2019 , we paid cash dividends of $0.48 and $0.96 per common share totaling $129.8 million and $260.0 million , respectively.

We anticipate that the available funds and cash generated from operations will be sufficient to meet cash and working capital requirements, including the anticipated level of capital expenditures, common stock repurchases, debt repayments and dividend payments for at least the next twelve months.

Off-Balance-Sheet Arrangements

As of December 28, 2019 , we did not have any material off-balance-sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company’s market risk has not changed materially from the interest rate and foreign currency risks disclosed in Item 7A of the Company’s Annual Report on Form 10-K for the fiscal year ended June 29, 2019 .

The impact of inflation and changing prices on the Company’s net revenues and on operating income during the three and six months ended December 28, 2019 and December 29, 2018 was not material.

ITEM 4: CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer (“CEO”) and our chief financial officer (“CFO”), evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”) as of December 28, 2019 . Our management, including the CEO and the CFO, has concluded that the Company’s disclosure controls and procedures were effective as of December 28, 2019 . The purpose of these controls and procedures is to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules, and that such information is accumulated and communicated to our management, including our CEO and our CFO, to allow timely decisions regarding required disclosures.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended December 28, 2019 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

Inherent Limitations on the Effectiveness of Internal Controls

A system of internal control over financial reporting is intended to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements in accordance with GAAP, and no control system, no matter how well designed and operated, can provide absolute assurance. The design of any control system is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of its inherent limitations, internal control over financial reporting may not prevent or detect financial statement errors and misstatements. Also, projection of any evaluation of effectiveness to future periods is subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

PART II. OTHER INFORMATION

ITEM 1: LEGAL PROCEEDINGS

The information set forth above under Part I, Item 1, Note 11 “Commitments and Contingencies” to the Condensed Consolidated Financial Statements is incorporated herein by reference.

ITEM 1A: RISK FACTORS

A description of risks associated with our business, financial condition and results of our operations is set forth in Item 1A - Risk Factors of our Annual Report on Form 10-K for the fiscal year ended June 29, 2019 , which is incorporated herein by reference.

ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On October 30, 2018, the Board of Directors of the Company authorized the repurchase of up to $1.5 billion of the Company’s common stock. This stock repurchase authorization does not have an expiration date and the pace of repurchase activity will depend on factors such as current stock price, levels of cash generated from operations, cash requirements, and other factors. The Company’s prior repurchase authorization was cancelled and superseded by this new repurchase authorization.

The following table summarizes the activity related to stock repurchases for the three months ended December 28, 2019 :



	Issuer Repurchases of Equity Securities
	(in thousands, except per share amounts)
	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs
Sep 29, 2019 - Oct 26, 2019	515	$	57.45	515	$	991,836
Oct 27, 2019 - Nov 23, 2019	520	58.29		520	961,551
Nov 24, 2019 - Dec 28, 2019	827	58.14		827	913,473
Total for the quarter	1,862	$	57.99	1,862	$	913,473

In the three months ended December 28, 2019 , the Company repurchased approximately 1.9 million shares of its common stock for approximately $108.0 million . As of December 28, 2019 , the Company had remaining authorization of $0.9 billion for future share repurchases. The number of shares to be repurchased and the timing of such repurchases will be based on several factors, including the price of the Company’s common stock and general market and business conditions.

ITEM 3: DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4: MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5: OTHER INFORMATION

None.

ITEM 6: EXHIBITS

(a) Exhibits



31.1	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act ⁽¹⁾
31.2	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act ⁽¹⁾
32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 ⁽¹⁾
32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 ⁽¹⁾
101.INS	Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. ⁽¹⁾
101.SCH	Inline XBRL Taxonomy Extension Schema Document ⁽¹⁾
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document ⁽¹⁾
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document ⁽¹⁾
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document ⁽¹⁾
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document ⁽¹⁾
104	Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. ⁽¹⁾



(1) Filed or furnished herewith.

In accordance with Rule 406T of Regulation S-T, the XBRL-related information in Exhibit 101 to this Quarterly Report on Form 10-Q is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act, is deemed not filed for purposes of Section 18 of the Exchange Act, and otherwise is not subject to liability under these sections.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



January 29, 2020		MAXIM INTEGRATED PRODUCTS, INC.

		By:/s/ Brian C. White
		Brian C. White
		Senior Vice President, Chief Financial Officer

TABLE OF CONTENTS

Part I. Financial Informationprint Item 1. Financial Statements (unaudited)print Note 1: Basis Of Presentationprint Note 2: Summary Of Significant Accounting Policiesprint Note 3: Balance Sheet Componentsprint Note 4: Fair Value Measurementsprint Note 5: Financial Instrumentsprint Note 6: Stock-based Compensationprint Note 7: Earnings Per Shareprint Note 8: Segment Informationprint Note 9: Comprehensive Income (loss)print Note 10: Income Taxesprint Note 11: Commitments and Contingenciesprint Note 12: Common Stock Repurchasesprint Note 13: Leasesprint Note 14: Goodwill and Intangible Assetsprint Item 2. Management S Discussion and Analysis Of Financial Condition and Results Of Operationsprint Item 3: Quantitative and Qualitative Disclosures About Market Riskprint Item 4: Controls and Proceduresprint Part II. Other Informationprint Item 1: Legal Proceedingsprint Item 1A: Risk Factorsprint Item 2: Unregistered Sales Of Equity Securities and Use Of Proceedsprint Item 3: Defaults Upon Senior Securitiesprint Item 4: Mine Safety Disclosuresprint Item 5: Other Informationprint Item 6: Exhibitsprint

Exhibits

31.1 Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act(1) 31.2 Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act(1) 32.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350(1) 32.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350(1)

Supplier name	Ticker
3M Company	MMM
International Business Machines Corporation	IBM
Applied Materials, Inc.	AMAT
Newmont Corporation	NEM
Intel Corporation	INTC
Lam Research Corporation	LRCX
Southern Copper Corporation	SCCO
Taiwan Semiconductor Manufacturing Company Limited	TSM

MXIM 10-Q Quarter ended Dec. 28, 2019

Exhibits